Asia sparks interest among global investors

Emerging Asian currencies are beginning to attract global investors once again, driven by a combination of economic stimulus in China, the weakening of the US dollar and positive signs in trade negotiations between Asia and the United States. 

Among the currencies attracting the most attention are the South Korean won, the Indonesian rupiah and the Indian rupee, which are among the most depreciated emerging currencies relative to their historical average, according to data compiled by Bloomberg. This historical undervaluation, combined with changing macroeconomic conditions, is giving rise to investment opportunities that many fund managers are already beginning to consider. 

One of the recent catalysts was the rebound of the Taiwanese dollar at the beginning of the month, which triggered a regional recovery across the board, helping Asian currencies narrow the gap with their developed and emerging market peers. This move was largely a consequence of the weakening of the dollar following the announcement of new tariffs by US President Donald Trump. 

Claudia Kalish, head of emerging market debt at M&G Investment Management, commented that ‘these currencies have been cheap on fundamentals for a long time,’ adding that many investors, after years of prioritising Latin America, are beginning to re-evaluate their portfolios towards Asia. ‘It's finally starting to correct a little bit, but it's still relatively cheap,’ she told Bloomberg. 

Goldman Sachs and Barclays highlight the Korean won as a currency with notable recovery potential, especially after its sharp decline due to reciprocal tariffs from the United States. They also point to the Malaysian ringgit and the South African rand as undervalued currencies, while Barclays identifies additional opportunities in the Singapore dollar and the Taiwanese dollar. 

Another key factor is the role of the Chinese yuan. Although the currency remains relatively stable as part of a strategy managed by the Beijing government, this stability can be a double-edged sword: on the one hand, it reduces regional volatility, but on the other, it limits the potential for rapid appreciation. Chinese authorities have reiterated that they will not allow a significant appreciation against the US dollar. 

Investor sentiment towards Asia has improved significantly. The Bloomberg Asia Currency Index has risen by around 3% since its April low. At the same time, global funds have resumed positions in local currency bonds in countries such as Indonesia, Thailand and South Korea, according to Bloomberg data. Pressure on the US dollar has been so intense that the Hong Kong Monetary Authority recently intervened to defend its exchange rate peg. 

Dominic Schneider, head of currency and commodities at UBS Group Wealth Management, noted that investors are beginning to look towards currencies that have not yet experienced significant appreciation. ‘Some of these emerging Asian currencies already look cheap from a valuation perspective,’ he concluded. 

With a volatile but opportunity-filled outlook, Asia is once again positioning itself as a key region for emerging currency markets, driving a reconfiguration of global investment strategies.